Stifel downgrades DS Smith to ‘hold’ from ‘buy’

"We lower our 2025-27 EBITDA by an average 2.4% on a less robust volume recovery and faster-than-expected containerboard price increases," Stifel said.

Its FY25 EBITDA estimate was cut by 4.2%, while the EPS estimate was cut 7.6%.

Stifel said that while rising containerboard prices will ultimately be reflected in higher box prices, its up-front downgrade reflects the lag of passing on increased containerboard prices to corrugated.

"We maintain our view that a merger with International Paper is good value for DS Smith and expect the deal to be approved at upcoming shareholder votes," it said. "However, in the past three months (from last Friday close) the DS Smith shares have gained 27% versus IP up 7% (S&P 500 +7%, FTSE100 +1%)."

Stifel noted that three months ago, DS Smith shares were pricing in a risk that the deal wasn’t going to materialise, but with Suzano pulling away from a potential bid for IP, the shares surged and, it believes have largely closed the arbitrage gap versus IP.

At 1445 BST, the shares were down 1.2% at 468.30p.